Gilat Satellite Networks Ltd. Q2 FY2025 earnings call

• Defense division continued to lay the groundwork for future growth with active engagement from customers across multiple regions, including North America, Europe, and Asia Pacific, and received over $8 million in orders from the Israeli Ministry of Defense. - Commercial business was a milestone quarter with strong bookings, including a $40 million contract for a virtualized SkyEdge IV platform and over $47 million in orders from Tier 1 satellite operators, driven by surging demand for multi-orbit ground segment technologies. - Stellar Blu announced $27 million in orders, with the Gilat Sidewinder ESA terminal exceeding expectations in performance, reliability, and user experience, and production ramp-up progressing with more units expected in Q3 and Q4 with better margins. - Gilat Peru had the award of more than $60 million in new orders from Pronatel for upgrading regional network infrastructure, demonstrating the company's role in digital inclusion.

Second quarter revenues reached $105 million, a 37% increase year-over-year. The Commercial segment had revenues of $69.1 million in Q2 '25, a 59% increase compared to $43.4 million in the same quarter of 2024, primarily due to the contribution of Stellar Blu which generated $36 million. The Defense segment had revenues of $20 million in Q2 '25, similar to the second quarter of the previous year. The Peru segment had revenues of $15.9 million in Q2 '25, an increase from $13.9 million in Q2 '24.

• Narrowed the revenue range to $435 to $455 million for a higher revenue growth rate of approximately 46% at the midpoint. - Narrowed the adjusted EBITDA guidance range to between $50 million to $53 million for a higher growth rate of approximately 22% at the midpoint.

• Uncertain global economic conditions. - Reductions in revenues from key customers. - Delays or reductions in U.S. and foreign military spend. - Acceptance of new products on a global basis. - Disruptions or delays in the supply of raw materials and components due to business conditions, global conflicts, weather, or other factors not under the company's control.

Q: How is the ramp at Stellar Blu proceeding and what are the margin expectations?

A: Production ramp-up is progressing, with better results expected in the third quarter and even more in the fourth quarter. Margins are ramping up slower than expected mainly due to component challenges but are expected to improve in later quarters.

Q: What's the fulfillment model for the virtualized SkyEdge IV win?

A: Initial order is software on cloud commercial off-the-shelf equipment, with revenue recognition as license sales or CapEx, plus ongoing maintenance services, and flexible business models including subscription-based.

Q: What are the main contributors to the improved guidance?

A: Better visibility on Stellar Blu and Gilat, significant business awards, and the backlog of opportunities.

Q: What's the status of Stellar Blu earn-out milestones?

A: First earn-out milestone not met, second earn-out to end of Q4 2025 with a good chance of meeting, third earn-out until mid-2026 with ongoing discussions.

Q: View on OneWeb Gen 2 and Iris Square?

A: Eutelsat wants to integrate OneWeb Gen 2 and Iris Square, Iris Square received an RFI, is delayed but will launch, and OneWeb Gen 2 will follow.

Q: Impact of Intelsat-SES merger?

A: People from both sides are still there, and business is continuing as usual with strong interest from both Intelsat and SES in the company's equipment.

Q: Is Stellar Blu's guidance still intact?

A: Yes, the guidance for $120 to $150 million in revenue and positive EBITDA in the second half of 2025 remains intact despite component changes.

Q: Status of Stellar Blu order front and Panasonic certification?

A: Expecting additional orders from Panasonic and others, certification with Panasonic near completion.

Q: Thoughts on cellular backhaul market and SkyEdge IV?

A: Slowness in cellular backhaul market, SkyEdge IV virtuous platform allows agility and flexibility but no immediate new features for this space.

Q: Pricing and margins for SkyEdge IV software only?

A: Prices are similar to hardware model, margins are positive as software development progresses.

Q: Progress on Wavestream NGSO order?

A: Progressing, received over $30 million, expecting additional orders.

Q: Backlog and exercise period?

A: Stellar Blu has a deal with about 1,000 antennas, backlog details not shared but there is decent visibility for future growth.